Human Sigma: Bringing Excellence to Managing People

"What Six Sigma did for manufacturing, Human Sigma will do for the service economy."

-- Ralph Oliva, Executive Director, Institute for the Study of Business Markets, Penn State University

Six Sigma transformed the manufacturing side of business, bringing excellence, quality, and conformity to finished goods. Now, Human Sigma, a new book published by Gallup Press, will bring the same excellence to the greatest challenge in business today -- managing people.

When it comes to human systems -- a company's employees and their relationships with customers -- businesses have dropped the ball. By moving the customer experience out of the face-to-face, bricks-and-mortar channels and into call centers and Internet sites, companies have ripped the soul out of business. Human Sigma: Managing the Employee-Customer Encounter, by John H. Fleming, Ph.D., and Jim Asplund, is an innovative and research-based approach to putting the people back into businesses, while simultaneously growing value and profits.

The new factory floor

During the industrial era, value came from labor: the physical effort required to build consumer goods. But in the new economy, the power and the profit lie with the worker. And the more engaged the knowledge worker is, the more profit he or she is capable of producing. A recent Gallup study of 89 companies showed that companies that built a critical mass of engaged employees grew earnings per share at 2.6 times the rate of low-engagement companies. (See "Investors, Take Note: Engagement Boosts Earnings" in the "See Also" area on this page.)

With true value and profit coming from the employee-customer encounter, this interaction has become the center of value creation -- what the factory floor was to the manufacturing era, this encounter becomes in the service-driven economy. To make the most of the employee-customer encounter and create real value on the new factory floor, companies must learn to measure and manage that experience and the people who create it. " Human Sigma," write the authors, "offers a new set of rules and a different way of thinking about managing your company's complex human systems."

The new rules

Based on studies of 10 million customers and 10 million employees around the globe, the five-step HumanSigma approach brings excellence to the way employees engage and interact with customers. The book offers a first-of-its-kind method (initially outlined in a 2005 article in the Harvard Business Review) to measure and improve employee and customer experiences and make them scalable across large and complex organizations.

Rule # 1: E Pluribus Unum. You can't measure and manage the employee and customer experiences as separate entities. Because you must manage these human systems in tandem, you may need to reorganize.

Rule #2: Feelings Are Facts. Emotions frame the employee-customer encounter.

Rule #3: Think Globally; Measure and Act Locally. You must measure and manage the employee-customer encounter at a local level.

Rule #4: There Is One Number You Need to Know. We can quantify and summarize the effectiveness of the employee-customer encounter in a single performance measure -- the HumanSigma metric -- that is powerfully related to financial performance.

Rule #5: If You Pray for Potatoes, You Better Grab a Hoe. Improvement in HumanSigma performance requires deliberate and active intervention through attention to a combination of transactional and transformational intervention activities.

Each of the 10 companies and 1,979 business units in the financial services, professional services, retail, and sales industries that has applied HumanSigma management principles has outperformed its five largest peers during a recent one-year period by 26% in gross margin and 85% in sales growth.

Human Sigma will change the way you think about your work, your employees, and your customers forever.

Human Sigma:

Managing the Employee-Customer Encounter

Authors: John H. Fleming, Ph.D., and Jim Asplund

Publication date: November 6, 2007

ISBN: 978-1-59562-016-3

Hardcover; 320 pages

About the Authors

John H. Fleming, Ph.D., is a Principal of Gallup and Chief Scientist for Gallup's Customer Engagement and HumanSigma practices. He consults with Gallup's global clients to help them improve customer engagement and enhance their business effectiveness. Fleming is a coauthor of the Harvard Business Review article "Manage your Human Sigma."

Prior to joining Gallup, Fleming spent six years as a member of the psychology faculty at the University of Minnesota. He received his doctorate in social psychology and a master's degree from Princeton University and his bachelor's degree from the College of William and Mary in Williamsburg, Virginia. He lives near Princeton, New Jersey, with his wife, Robin, and their daughters, Allison and Emma.

Jim Asplund is a Principal of Gallup and Chief Scientist for Strengths-Based Development. He leads Gallup's global research on the science of human strengths and how to apply them to improve organizational performance. Asplund is also one of Gallup's leading methodologists, specializing in complex research and development efforts.

Prior to joining Gallup, Asplund spent eight years as a policy expert and lobbyist at the Minnesota Legislature, representing clients in the areas of taxation, education funding, and economic development. He earned his master's degree in public policy with emphasis in mathematical demography from the University of Minnesota and his bachelor's degree in mathematics from Grinnell College in Iowa. Asplund lives near St. Paul, Minnesota, with his wife, Susan, and their sons, Jakob and Jonas.

An Interview With John H. Fleming, Ph.D., and Jim Asplund, Authors of Human Sigma

Q: What is HumanSigma, and why do companies need it?

A: The HumanSigma approach combines a proven method for assessing the health of the employee-customer encounter with a disciplined process for improving it. It is based on five new rules to bring excellence to the way employees engage and interact with customers. Companies that follow these principles are outpacing their competition by 26% in gross margin and 85% in sales growth.

Q: It seems it would be difficult to measure human interactions in a scientific way. Can you tell us how that is done?

A: The act of measuring itself is quite simple: Ask the people involved in an interaction how it made them feel. This simple activity is based on a large body of scientific research about what to ask them, how to ask them, and why asking them works. The right questions are crucial -- that is the expertise we have accumulated over a long period of time researching and consulting on the issues and from reviewing data from the millions of employees and customers we have interviewed.

Q: Once you have learned to measure this employee-customer encounter, how can a company work to improve it?

A: Sustainable improvement in the employee-customer encounter requires disciplined local action coupled with a company-wide commitment to changing how employees are recruited, positioned in roles, rewarded and recognized, and, most importantly, how they are managed. The last four chapters of Human Sigma provide a road map for action.

Q: In the book, you speak a lot about the "engaged employee." Can you define what an engaged worker is?

A: An engaged employee is psychologically involved in his or her work and is enthusiastic about the challenges of that work. Engaged employees use their discretionary effort to help their organization improve through higher productivity, greater efficiency and innovation, and more meaningful customer impact, leading to higher profitability.

Q: How big is the problem of disengaged workers?

A: In the United States alone, we have estimated $300 billion in annual lost productivity due to disengagement. Even in the U.S. economy, that is a staggering number. (See "What Your Disaffected Workers Cost" in the "See Also" area on this page.)

Q: If it is clear from the research that engaged employees hold the key to raising profits and value in a company, why is it that management has been traditionally inept at measuring and managing them?

A: We have only learned how to measure this accurately in the past 10 to 15 years, so part of the problem has been a simple lack of reliable metrics. This inability to measure engagement also prevented the accumulation of the data needed to build a solid understanding of how to engage employees.

Now that we have a considerable amount of data, it has also become quite clear that many of the assumptions companies have made about their employees have simply been wrong. For example, there has been a tendency on the part of many executives to value control over quality by scripting employee behaviors when they interact with customers. These executives view employees as mistakes just waiting to happen, as impediments to doing business, and as costs to be minimized. It is difficult to engage an employee who knows that he is viewed as a costly nuisance at best by the organization's leadership.

Q: Can you give us an example of a company that has learned or is learning to manage these customer experiences better? How is it benefiting the company?

A: One large consumer bank we have worked with has found that it can dramatically improve its branches' HumanSigma performance by doing a few core things. First, it made a company-wide commitment to taking disciplined and focused local action to improve the employee-customer encounter. Creating engaged employees and emotionally connected customers was more than mere lip service. Second, the bank deployed a broad array of intervention activities.

These activities targeted two separate issues. The first was finding ways to do what it already did, but to do them better -- what we refer to as transactional interventions. Transactional intervention activities include things such as local team action planning, brainstorming, and Six Sigma initiatives, to name a few.

But the bank also began to fundamentally change how it identified and recruited talent, positioned people within roles for success, rewarded and recognized employees, and, most importantly, managed them. We refer to these kinds of actions as transformational interventions. Both transactional and transformational activities are essential for sustainable improvement in the employee-customer encounter.

The financial results of these activities were dramatic. In just one year, the bank was able to move a large number of branches into a higher HumanSigma performance level. In fact, branches that improved by at least one HumanSigma level, as well as those that performed consistently in the highest two levels, accounted for more than 99% of the year-over-year profit increase for the consumer bank.

Q: Can every company or organization benefit from the principles in Human Sigma ?

A: Absolutely. HumanSigma focuses organizations on accepting human nature and capitalizing on it to manage employees, motivate them, accelerate development, and unleash innovation and productivity to ultimately engage the emotions of the company's most valuable assets -- the customers they serve.

Q: Why is Human Sigma particularly important right now? Has the knowledge and service economy made the "people factor" in business more important throughout, say, the past 50 years?

A: It certainly has. In Human Sigma, we discuss the long historical progression that led companies to focus on improving the other factors in business. This can best be summarized as an entrenched belief in the "factory" or the "supply chain," for example, as the source of a company's productivity, rather than the people who worked in those systems.

In the period right after World War II, in particular, many economies around the world were in shambles and needed to focus on basic needs to restore themselves to health. Even in the United States, the postwar boom was largely about producing the cars, refrigerators, and other conveniences that many had gone without during the Depression and the war that followed.

In this environment, employees sought jobs that could provide stability -- even the promise of lifetime employment -- and a decent pension to provide for the few years of retirement that they expected. At the same time, companies found that significant gains were possible through quality improvement efforts such as TQM and Six Sigma. This was particularly true for manufacturing entities that were the major employers and the face of American industry.

But that was yesterday. Today, the economy is driven largely by innovation and knowledge workers. Even in the manufacturing sector, the companies that are thriving are doing so thanks to the incredible productivity of their employees. We work with some of the best and most prosperous companies in the world; decades of process improvements have reached the point of diminishing returns in these organizations, and they need to get the most out of their human systems to continue their growth. They simply have no other choice.

Q: If readers come away from this book with a single concept, what would you hope that would be?

A: That feelings are facts. Emotions drive and shape the employee-customer encounter because we are people first -- and employees and customers second. Once a reader understands the limitations inherent in viewing people as rational actors, he or she can begin to see the benefits of focusing on the full range of complex behaviors that we exhibit as human beings, as well as how to manage those behaviors.